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AMERICAN    BAR    ASSOCIATION, 


THE  DARTMOUTH  COLLEGE  CASE  AND 
PRIVATE  CORPORATIONS. 


A    PAPER    PFliSENTED  BY 


WILLIAM    P.   WELLS, 


OF   DETROIT. 


Xinthi    Annual    NIeeting,  August   19,    1886. 


[Reprinted  from  the  Report  of  the  Transactions  of  the  AssociaHon.'] 


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THE 


AMERICAN    BAR    ASSOCIATION. 


THE  DARTMOUTH  COLLEGE  CASE  AND 
PRIVATE  CORPORATIONS. 


A   PAPER   PRESENTED   BY 


WILLIAM    P.    WELLS. 

OF   DETROIT, 


Ninthi    A.nnua.1    Xleeting,  A^tigtast   19,    1886, 


\_Reprinted  from  the  Report  of  the  Transactions  of  the  Association.'\ 


Dando   Printing  and'?ublishing   Co. 

!£$*.;.•, :.,  :i* ;,; 


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READ    BY 

WILLIAM  P.  WELLS. 


The  Dartmouth  College  Case  and  Private  Corporations. 

Chancellor  Kent,  writing  in  1826,  thus  expressed  himself 
concerning  the  Dartmouth  College  case :  *  "It  contains  one 
of  the  most  full  and  elaborate  expositions  of  the  constitutional 
sanctity  of  contracts  to  be  met  with  in  any  of  the  reports. 
The  decisi^iLinjthat  case  did  more  than  any  other  single  act 
proceeding  from  the  authority  of  the  United  States  to  throw 
an  impregnable  barrier  around  all  rights  and  franchises  derived 
from  the  grant  of  government  and  to  give  solidity  and 
inviolability  to  the  literary,  charitable,  religious  and  commer- 
cial institutions  of  our  country." 

Another  learned  commentator,  Mr.  Justice  Cooley,  writing 
nearly  fifty  years  later,  adds  to  his  statement  of  the  doctrine 
established  in  that  case  the  following  rf  "It  isjULnder  the 
protectjon  of  the  decision  in  the  Dartmouth  College  case  that 
the  most  enormdiIF*Tmd  i;hfeatening  powers  in  our  country 
have  been  created,  some  of  the  great  and  wealthy  corporations 
having  greater  influence  in  the  country  at  large  and  upon  the 
legislation  of  the  country  than  the  states  to  which  they  owe 
their  corporate  existence.  Ever^_prrvilege  granted  or  right 
conferred,  no  matter  by  what  means  or  on  what  pretence, 
being  made  inviolable  by  the  constitution,  the  government  is 


*  1  Kent's  Comm.  419. 

t  Cooley's  Const.  Lim.,  279-80, 

(3) 


viOOSi 


frequently  found  stripped  of  its  authority  in  very  important 
particulars  by  unwise,  careless  or  corrupt  legislation,  and  a 
clause  in  tlie  federal  constitution,  whose  purpose  was  to  pre- 
clude the  repudiation  of  debts  and  just  contracts,  protects  and 
perpetuates  the  evil." 

During  the  period  which  has  elapsed  since  Chancellor  Kent 
wrote,  the  great  development  of  private  corporations  has  taken 
place  in  this  country,  their  wealth  and  strength  have  im- 
mensely increased,  and  they  have  become  possessed,  unques- 
tionably, of  vast  and  dangerous  powers.  And  these  contrasted 
statements  of  the  eifects  of  this  decision  present  a  most  inter- 
esting inquiry.  The  first  represents  an  opinion  which  pre- 
vailed in  the  profession  and  in  the  courts  long  after  the 
decision  was  made,  and  which  still  receives  strong  support 
from  the  bar  and  from  the  decisions  of  the  highest  tribunals. 
But  it  must  be  acknowledged  that  the  second  of  the  foregoing 
statements  is  only  a  moderate  expression  of  professional  and 
public  opinion  upon  this  important  subject.  While,  on  the 
one  hand,  it  is  maintained  that  the  original  adjudication  was 
not  only  right  in  itself,  but  has  been  rightly  affirmed  and 
applied  in  succeeding  cases  and  should  not  be  disturbed ;  that 
the  court  which  originally  pronounced  it  should  not  and  will 
not  take  any  backward  steps  in  respect  to  the  doctrine  estab- 
lished ;  on  the  other  hand,  not  only  has  the  correctness  of  the 
decision  been  repeatedly  challenged,  but  a  swelling  chorus  of 
denunciation,  proceeding  from  lawyers  and  the  press  and  the 
people,  assails  it  as  fons  et  origo  of  monstrous  wrong  and  per- 
nicious consequences,  and  predictions  manifold  are  not  want- 
ing that  it  must  sooner  or  later  be  reviewed  and  reversed. 
It  cannot,  therefore,  be  inappropriate  for  an  association  of  the 
bar  of  the  country  to  consider  whether  the  effect  of  this  great 
judgment  has  been  beneficent  or  evil ;  whether  alleged  abuses 
of  corporate  powers  and  alleged  corporate 'encroachments  upon 
public  rights,  which  are  at  present  engaging  the  solicitude  of 
lawyers,  legislators  and  the  people  alike,  are  chiefly  attributa- 
ble to  or  find  support  in  the  decision ;  whether  corporations 


find  in  the  courts  under  it  an  "impregnable  barrier*'  behind 
which  they  may  do  mischief,  or  only  a  just  shelter  for  their 
clear  rights;  whether  the  judicial  tribunals  have  only  justly 
applied  a  clause  of  the  federal  constitution,  or  have  pressed 
the  decision  too  far,  with  evil  consequences  to  the  people. 
Such  consideration,  in  other  words,  involves  an  inquiry  into 
the  connection,  real  or  supposed,  between  the  Dartmouth  Col- 
lage case  and  the  pressing  questions  of  corporate  power,  re- 
sponsibility and  restraint  which  are  now  the  subjects  of  great 
public  anxiety.  But  the  appropriate  limits  of  the  discussion 
only  allow  a  suggestive  rather  than  a  thorough  treatment  of 
the  topic. 

The  inquiry  first  requires  a  brief  consideration  of  the 
doctrine  established  and  its  applications.  But  it  is  unnecessary 
to  examine  at  any  length  the  cases  in  the  federal  and  state 
courts  in  which  the  principle  of  the  leading  case  has  been 
applied,  for  this  would  be  only  a  repetition  of  familiar  learn- 
ing. It  will  be  sufficient  to  notice  the  well-known  rules  flow- 
ing from  the  original  decision,  which  have  been  administered 
for  the  protection  of  private  business  corporations.  It  will 
appear  that  the  decisions,  during  a  period  of  sixty -five  years, 
have  affirmed  a  body  of  legal  rules,  as  applications  of  the 
doctrine  of  the  leading  case,  which,  to  say  the  least,  consti- 
tute a  strong  and  valuable  support  of  corporate  privileges. 

A  strict  statement  of  the  decision  in  the  principal  case,* 
in  1819,  is,  that  the  charters  of  J)rivate  corporations  are 
contracts  between  the  legislature  and  the  corporation^,  having 
for  their  consideration  the  liabilities  and  duties  which  the 
corporations  assume  by  accepting  them,  and  the  grant  of  the 
franchise  can  no  more  be  resumed  by  the  legislature,  or  its 
benefits  diminished  or  impaired,  without  the  consent  of  the 
grantees,  than  any  other  grant  of  property  or  valuable  thing, 
unless  the  right  to  do  so  is  reserved  in  the  charter  itself. 

*  The  Dartmouth  College  Case,  4  Wheaton,  518. 


6 

This  principle,  in  subsequent  cases,  was  held  to  embrace  all 
contracts,  executed  and  executory,  between  the  state  and 
private  corporations;*  and  it  was  also  settled  that  the  in- 
alidity  of  legislation  impairing  the  contract  does  not  depend 
upon  the  extent  of  the  impairment,  f 

I.  Let  us  consider,  at  the  outset,  the  beneficial  results  to 
corporations  of  the  Dartmouth  College  case.  It  was  inevitable, 
when  such  a  decision  had  been  announced  by  the  supreme 
tribunal  of  the  federal  government,  that  corporations  would 
at  once  perceive  its  value  to  them,  and  be  swift  to  seize  upon 
the  advantages  it  conferred  upon  them.  A  mere  glance  at 
the  familiar  classes  of  cases  in  which  the  principle  has  been 
applied,  shows  their  variety  and  importance,  and  that  business 
corporations  have  never  failed  to  invoke  its  protection  when- 
ever their  chartered  rights  have  been  drawn  into  controversy. 

(1)  In  respect  to  the  title  to  corporate  property,  derived 
from  the  state,  other  than  franchises,  it  was  soon  established, 
by  many  decisions,  that  legislative  grants  to  corporations  vest 
an  absolute  title,  which  could  not  be  afterwards  resumed  or 
controlled  by  the  legislature,  any  more  than  an  absolute  grant 
to  individuals.  It  having  been  previously  decided  that  legis- 
lative grants  are  irrepealable,J  the  decision  that  a  charter  is  a 
contract,  brought  all  property  granted  by  a  charter  within  the 
protection  given  to  grants  to  individuals.  The  value  of  such 
a  principle  to  private  business  corporations  is  at  once  apparent. 
It  is  only  necessary  to  refer  to  the  history  of  state  and  federal 
legislation,  which  has  conferred  upon  them  profuse  grants  of 
property,  to  show  how  beneficial  to  corporations  the  adminis- 
tration of  this   rule  of  law  has  been.     The  disposition  to 

*  Green  vs.  Biddle,  8  Wheat.  1 ;  Bridge  Proprietors  vs.  Hoboken,  1  WalL 
116. 

t  Planters'  Bank  vs.  Sharp,  6  How.  327  ;  Bronson  vs.  Kinzie,  1  How. 
311. 

t  Fletcher  vs.  Peck,  6  Cranch,  87  ;  Terrett  vs.  Taylor,  9  Cranch,  43 ; 
Town  of  Pawlet  vs.  Clark,  Ibid.  292 ;  Davis  vs.  Gray,  16  Wall.  203. 


encourage  corporate  organization  and  effort,  which  was 
especially  indulged  in  the  early  history  of  the  country,  has 
been  wrought  upon  by  corporations  ever  since  with  unflagging 
energy  and  persistence.  The  public  funds,  the  public  domain, 
seem  to  have  been  regarded  as  theirs  by  right,  and  state  and 
federal  legislatures,  influenced  by  all  manner  of  solicitation 
and  importunity,  and  won  by  all  the  arts  of  conciliation  and 
persuasion,  have  enriched  corporations  by  abundant  and  over- 
flowing donations,  and  thus  established  and  strengthened  the 
solid  structure  of  their  wealth  and  power. 

(2)  The  same  principle,  by  repeated  adjudications,  was  held 
to  apply  to  grants  of  the  franchises  of  corporations.  They 
were  held  to  be  property,  and  irrevocable  by  legislation,  after 
acceptance  by  the  corporations,  on  the  terms  of  the  charters. 
Greatas  have  been  the  value  and  benefits  of  the  large  grants 
'of^foperty  made  to  corporations,  these  are^sgEuall  compared 
with  the  worth  of  franchises  which,  once  obtained,  bestow 
special  and  ample  powers  for  the  acquisition  of  property,  its 
consolidation  in  the  hands  of  corporations,  and  afford  to  them 
the  ability  and  present  the  strong  temptation  to  act  solely  for 
their  own  aggrandizement,  in  disregard  of  the  public  interest. 
In  the  early  history  of  corporations  in  this  country  all  charters 
were  special,  each  resting  upon  its  own  terms,  and  granting 
varied  privileges,  always  specially  valuable.  The  development 
of  the  country  and  its  resources  justified-  the  liberal  encour- 
agement of  corporate  enterprises,  and  the  grants  and  fran- 
chises conferred  by  charters  were  given  upon  sound  consider- 
ations of  public  policy  and  benefit  to  the  country.  But  all 
business  corporations,  by  the  subsequent  application  to  them 
of  the  decision  in  the  principal  case,  gained  enormous  power, 
and  secured  a  firm  foothold  for  action  which  inevitably  resulted 
in  aggressions  upon  the  public. 

If  it  be  said,  as  must  be  conceded,  that  the  inviolability  of 
grants  to  corporations,  other  than  franchises,  confers  upon 
them   no   rights   beyond   those   given   by   grants  to  natural 


8 

persons,  upon  sufficient  consideration,  and  rests  upon  principles 
of  justice  and  morality  applicable  alike  to  natural  and 
artificial  persons,  it  may  be  replied  that  the  chief  advantage 
which  has  been  derived  by  corporations  from  the  Dartmouth 
College  decisior^s  the  removal  of  their  franchises  from  legis- 
lative control,  the  constant  exercise  of  which  is  essential  to 
the  public  welfare.  By  the  bestowal  of  such  franchises  there 
are  conferred  upon  corporate  and  associated  capital  powers 
which  individuals  cannot  have,  powers  for  good  certainly,  but 
also  powers  for  evil,  which  have  been  exercised  to  such  public 
detriment  that  the  people  have  been  stirred  to  their  depths  by  a 
sense  of  the  immediate  and  urgent  necessity  of  finding, 
under  the  law  and  through  the  judicial  tribunals,  or  above  and 
outside  of  them,  some  efiectual  means  of  restraint  upon 
corporate  abuses. 

(3)  In  respect  to  the  use  and  enjoyment  of  corporate  pro- 
perty and  franchises,  it  must  be  admitted  that  the  principal 
decision  has  been  the  source  of  the  same  priceless  advantages 
to  corporations.  The  special  charters  which  were  granted 
under  the  influence  of  the  sentiment  favorable  to  corporations, 
which  prevailed  alike  in  legislatjH'es  and  in  courts,  generally 
included  special  privileges  in  th'e  use  of  corporate  franchises 
and  the  carrying  on  of  corporate  business.  When  secured, 
these  are  irrevocable.  Corporations  thereby  become  possessed 
of  the  power  to  determine,  without  restriction  and  without 
legislative  control,  the  compensation  they  shall  receive  for 
services,  the  profits  from  the  use  of  their  property,  "  its  use 
and  the  fruits  of  that  use."  In  innumerable  cases,  in  the 
state  and  federal  courts,  the  special  provisions  of  charters  to 
this  end  have  been  held  to  be  beyond  legislative  interference 
under  the  principle  of  the  DartmouthjCoUeg^  decision.  The 
benefits  thereby^'secured  to  corporations  need  no  description. 
The  advantages  are  obvious  which  they  have  derived  from  the 
principle  that  the  right  to  regulate  and  fix  their  own  compen- 
sation fof^ervices  results  from  their  general  power  to  carry  on 


9 

the  business  for  which  they  are  organized,  and  that  such  com- 
pensation must  be  determined  by  the  corporate  body  itself. 
The  authorities  to  this  effect  were  uniform*  until  the  compara- 
tively recent  decisions  of  the  Supreme  Court  as  to  the  regula- 
tion of  corporate  business,  which  will  be  considered  hereafter. 
It  is  against  this  right  and  this  power  of  corporations  to 
determine  their  own  charges,  and  the  undeniable  abuses  thereof, 
that  the  public  sentiment  referred  to  has  been  especially 
directed,  and  which,  not  yet  wholly  allayed,  though  diminished, 
has,  unintelligently  perhaps,  found  in  the  leading  case  the 
sole  source  of  corporate  injuries  to  the  public. 

(4)  The  exemption  of  private  corporations  from  taxation 
altogether  and  taxation  at  special  and  favorable  rates,  under 
charter  provisions,  have  been  of  such  advantage  to  them  that, 
more  than  any  other  of  their  privileges,  perhaps,  these  have 
encountered  the  disapproval  and  opposition  of  the  people  and 
the  profession ;  and  the  established  rules  of  law  protecting 
such  exemptions  have  challenged,  probably,  more  severe 
criticism  than  any  application  of  the  Dartmouth  College 
decision.  The  principle  that  the  legislature  may  make  an 
irrevocable  contract  of  exemption  from  taxation  does  not  rest 
in  its  origin  upon  that  decision,  It  found  its  earliest  asser- 
tion in  the  case  of  New  Jersey  vs.  Wilson,  f  in  1812,  and  the 
succeeding  cases  which  affirm  the  rule  profess  to  rest  upon 
that  case.  4!  The  decision  was,  that  under  the  constitution 
the  repeal  of  a  law  granting  total  or  partial  exemption  from 

*Penn.  K.  R.  Co.  vs.  Sly,  65  Penn.  St.  205;  Phil.,  Wilm.  &  Bait.  R.  R. 
Co.  vs.  Bowers,  4  Houst.  506;  Hamilton  vs.  Kutte,  5  Bush,  (Ky.)  458. 

t  7  Cranch,  164. 

X  Gordon  vs.  Appeal  Tax  Court,  3  How.  133 ;  Piqua  Bank  vs.  Knoop, 
16  How.  369 ;  Ohio  Life  and  Trust  Co.  vs.  Debolt,  16  How.  416 ;  Dodge 
vs.  Woolsey,  18  How.  331 ;  Mech.  and  Traders  Bank  vs.  Thomas,  18  How. 
384;  McGee  vs.  Mathis,  4  Wall.  143;  Jefferson  Bank  vs.  Skelly,  1  Black, 
436;  Home  of  the  Friendless  v^.  Rouse,  8  Wall.  438;  Wilmington  Rail- 
road vs.  Reid,  13  Wall.  264 ;  Farrington  vs.  Tennessee,  95  U.  S.  679  J 
Murray  vs.  Charleston,  96  U.  S.  432. 


10 

taxation  impairs  the  contract  made  by  the  grant  of  the  privi- 
lege. Whether  or  not  it  was  rightly  decided  that  the  prohibi- 
tion of  the  constitution  applied  to  the  exemption  in  question 
in  the  case,  it  has  remained  as  the  basis  of  subsequent  decis- 
ions and  has  been  repeatedly  affirmed  by  the  Supreme  Court, 
though  not  without  most  strenuous  dissent  by  a  strong  minor- 
ity of  the  court.  But  it  is  by  virtue  of  the  decision  in  the 
Dartmouth  College  case  that  the  principle  has  its  application 
to  private  corporations.  The  decision  that  a  charter  is  a 
contract  made  available  to  them  the  doctrine  that  contracts  of 
exemption  from  taxation  are  protected  by  the  constitution, 
notwithstanding  that  the  states  are,  by  such  contracts,  deprived 
of  the  exercise  of  one  of  the  powers  of  sovereignty.  And 
the  majority  of  the  cases  in  which  the  principle  established  in 
New  Jersey  vs.  Wilson  has  been  affirmed  have  been  cases 
where  corporate  charters  providing  for  exemption  from  taxa- 
tion have  been  drawn  in  question.  In  one  of  these  cases  it  is 
said  that  "  attempted  state  taxation  is  the  mode  most  frequently 
adopted  to  affect  contracts  contrary  to  the  constitutional  inhi- 
bition. It  most  frequently  calls  for  the  exercise  of  our  super- 
visory power."* 

And  this  supervisory  power  the  court  has  steadily  exercised 
to  declare  void  all  state  legislation  impairing  contracts  of 
exemption  made  with  corporations  in  their  charters.  Not- 
withstanding the  earnest  opposition  and  protests  of  the 
minority  of  the  court,  at  all  times,  the  majority  has  not  failed 
to  protect  the  contract  of  exemption  when  the  provisions  of 
the  charter  clearly  expressed  it.  And  one  of  the  minority 
has  not  hesitated  to  say  that  the  court  has  been  "  at  times 
quick  to  discover  a  contract,  that  it  might  be  protected,  and 
slow  to  perceive  that  what  are  claimed  to  be  contracts  were  not 
so,  by  reason  of  the  want  of  authority  in  those  who  profess  to 
bind  others.  This  has  been  especially  apparent  in  regard  to 
contracts  made  by  legislatures  of  states,  and  by  those  municipal 

*  Murray  vs.  Charleston,  96  U.  S.  432. 


11 

bodies  to  whom,  in  a  limited  measure,  some  part  of  the  legis- 
lative function  has  been  confided."* 

It  is  believed  to  be  the  general  opinion  of  the  profession 
that  if  the  question  whether  a  state  legislature  can  release  the 
sovereign  power  of  taxation  were  res  ijitegra,  it  would  be 
decided  in  the  negative  by  every  judicial  tribunal,  state  and 
federal.  Discriminations  in  respect  to  taxation,  favorable  to 
corporations,  originally  granted  in  conformity  with  the  public 
sentiment,  which,  as  has  been  said,  encouraged  them  by 
favoring  legislation,  are  now  seen  to  be  unwise  and  un- 
necessary. The  time  when  corporations  need  such  support  or 
encouragement  long  ago  passed  away.  The  public,  which 
once  looked  with  favor  upon  their  privileges,  is  now  alarmed  by 
their  encroachments,  and  the  profession  and  the  public  alike 
realize  the  consequences  of  the  doctrine,  that  under  the 
decision  of  the  Dartmouth  College  case  the  essential  sovereign 
powers  of  a  state  relating  to  revenue,  which  ought  to  be 
most  sacredly  guarded  and  conserved,  may  be  bartered  away 
in  favor  of  corporations,  whose  influence  upon  legislation  has 
been  almost  irresistible,  and  whose  privileges  have  been  often 
secured  by  the  exercise  of  "  the  sly  and  stealthy  arts  to  which 
state  legislatures  are  exposed,  and  the  greedy  appetites  of 
adventurers  for  monopolies  and  immunities  from  the  state 
right  of  government. "f     If  the  Dartmouth  College  case  had 

*  Miller,  J.,  in  Washington  University  vs.  Kouse,  8  Wall.  442. 

t  Since  the  above  was  written,  the  decision  in  Given  vs.  Wright,  117 
U.  S.  648,  has  been  announced,  affirming  anew  the  case  of  New  Jersey  vs. 
WiLson,  and  bringing  to  notice  the  singular  fact,  that  the  exemption  sus- 
tained in  that  case,  originally  granted  to  the  Delaware  Indians,  which 
passed  to  the  purchasers  of  their  lands,  was  not  insisted  upon  by  the 
holders  of  the  lands,  and  taxes  were  paid  for  the  whole  period  of  about 
sixty  years  since  the  original  decision.  Given  vs.  Wright  decides  that  the 
long  acquiescence  of  the  land-owners  under  the  imposition  of  taxes, 
raised  a  presumption  that  the  exemption  which  once  existed  had  been 
surrendered,  as  it  was  a  franchise  or  privilege  which  could  be  lost  by 
acquiescence.  The  court  expresses  the  opinion  that  if  the  question  in 
New  Jersey  vs.  Wilson  were  a  new  one,  it  might  be  differently  decided. 


12 

been  nothings  more  to  corporations  than  the  basis  of  their  pro- 
tection against  taxaETohl  it  i^OuldngCYe^dSserved,  even  then,  as 
the  principle  has  been  actually  applied,  the  protests  found  in 
the  dissenting  opinions  of  the  judges,  the  criticism  of  the 
profession  and  the  complaints  of  the  people. 

II.  Here,  then,  we  have  the  established  principles,  resting 
upon  the  Dartmouth  College  case,  under  which  corporations 
have  complete  protection  for  their  corporate  rights  and  fran- 
chises, the  title  and  use  of  corporate  property,  immunities 
and  exemptions  in  respect  to  taxation,  safety  from  any  alter- 
ation or  impairment  of  the  rights  and  the  proprietary  condi- 
tion secured  by  their  charters.  These  are  the  direct  results 
of  that  decision.  But  it  is  also  the  foundation  upon  which 
private^  business  corporations  in  this  country  are  grounded, 
for  injurious"  as  well  as  beneficent  purposes.  Under  it  they 
have  found  a  position  from  which  they  are  enabled  to  deliver 
the  heavy  fire,  and  carrry  on  the  noxious  warfare,  of  cor- 
porate abuses  and  injustice.  It  is  the  shelter  under  which 
the  vast  capital  embarked  in  corporate  business  may  be 
employed  not  only  in  serving  the  people  but  in  oppressing 
them.  The  connection  between  this  state  of  things  and  the 
decision  may  be  traced  by  the  simple  inquiry,  what  would 
have  been  the  condition  of  private  corporations  if  the  decision 
had  not  been  made  ?  The  answer  is,  that  they  would  have 
remained  subject  to  complete" legislative  supervision  and  con- 
troI.__  If  tHis  is  desirable  it  would  seem  that  it  can  only  be 
brought  about  now  by  retracing  the  path  in  which  the  Dart- 
mouth College  case  was  the  first  step.  Whether  it  is  desirable 
or  not  there  is  a  difference  of  opinion ;  whether  it  is  likely  to 
be  accomplished  is  still  more  doubtful.  But  that  the  decision, 
strong  and  fixed  in  our  jurisprudence  by  repeated  affirma- 
tions, venerable  and  by  many  regarded  with  a  veneration 
which  stigmatizes  as  profane  any  criticism  of  its  principles, 
stands,  until  explicitly  reversed,  in  the  way  of  the  complete 
legislative  restraint  of  corporations,  is  certain. 


13 

It  is  indisputable,  therefore,  that  the  beneficial  results  of 
the  decision  to  private  corporations  have  been  inestimable.  It 
has  secured  to  them,  beyond  recall,  enormous  privileges  and 
powers.  It  is  the  comer-stone  of  a  structure  of  corporate 
wealth  and  influence,  which  has  been  broadening  and  rising 
higher  with  every  succeeding  year.  It  has  encouraged  them 
in  independence  of  the  legislative  and  popular  will,  and  offers  to 
them  a  constant  temptation  to  wield  their  vast  resources  solely 
for  their  own  aggrandizement.  It  forbids  legislation,  however 
desirable,  which  is  often  essential  to  the  public  welfare.  All 
this  may  be  fairly  said  without  partaking  of  a  spirit  of  unrea- 
soning hostility  to  corporations.  The  criticism  of  the  original 
decision  which  asserts  that  it  has  been  the  source  of  such 
priceless  benefits  to  corporations  is  rational  and  just.  No 
judicial  mind  could  have  anticipated,  at  the  time  of  the  de- 
cision, the  extent  of  subsequent  applications  of  a  principle 
declared  in  the  case  of  a  college  to  business  corporations,  any 
more  than  the  extensive  and  varied  growth  of  corporations 
could  have  been  foreseen.  But,  from  the  beginning,  the 
application  of  the  rule  to  the  charters  of  business  corporations 
has  been  asserted  and  defended  as  necessary  to  stimulate  cor- 
porate enterprise  and  investments.*  However  this  may  have 
been,  it  is  certain  that  there  is  some  foundation  for  professional 
and  public  opinion  that  the  principle  of  the  leading  case  has 
been  pressed  too  far  in  the  courts  ;  that  not  only  has  reason- 
able encouragement  been  afforded  to  corporate  exertion,  but 
that  it  has  emboldened  corporations  in  independence,  in  inva- 
sions of  public  right  and  in  abuses  of  their  lawful  powers. 

III.  The  larger  part  of  professional  and  lay  criticism  upon 
the  Dartmouth  College  case  and  its  results  has  been  directed 
against  the  Supreme  Court,  asserting  that  the  principle  has 
been  pressed  too  far,  to  the  advantage  of  corporations  and  the 
protection  of  vested   interests ;   that  it  has  "  been   made  to 

*  The  Binghamton  Bridge,  3  Wall.  74. 


14 

sustain  grants  which  neither  law  nor  justice  nor  sound  prin- 
ciple can  sanction;"  that  "the  rule  in  that  case  has  been 
perverted  to  the  maintenance  of  corporate  institutions  invested 
with  great  public  functions."*  This  is  apart  from  the  question 
of  the  soundness  of  the  original  decision,  which  has  been 
repeatedly  challenged  and  discussed  with  great  research  and 
ability,!  ^^^  which  is  not  within  the  purpose  of  this  paper. 
In  estimating  the  force  and  justice  of  such  animadversions, 
it  is  necessary  to  consider  the  principal  case  and  the  later 
decisions  founded  upon  it,  and  the  course  of  decision  in  the 
Supreme  Court  alone,  regarded  as  a  body  or  system  of  legal 
doctrine.     Of  this  the  constituents  are  : 

(1)  The  principle  that  the  charter  of  a  private  corporation 
is  a  contract.  The  court  has  firmly  and  steadily  applied  this 
principle  in  cases  of  business  corporations,  and  whenever  the 
contract  has  been  found  in  the  charter  it  has  been  protected 
from  impairment  or  violation,  and  legislation  to  that  effect  has 
been  held  invalid.  Thus  business  corporations  have  been 
secured  in  the  possession  and  enjoyment  of  every  privilege, 
exemption  and  benefit  clearly  conferred  by  charters ;  in  the 
irrevocable  title  to  property  and  franchises  granted;  in  the 
exclusion  of  competing  corporate  enterprises  and  works ;  in 
freedom  from  increased  public  burdens;  in  the  right  to  the 
use  and  enjoyment  of  their  property  and  franchises ;  in  im- 
munity from  legislative  control. J      And  the  court  has  never 

*  See,  as  representative  of  such  criticism,  a  very  interesting  and  able 
address  by  Hon.  John  A.  Jameson,  of  Chicago,  before  the  Illinois  State 
Bar  Association,  January  6,  1882,  upon  "  Interference  by  Law  with  the 
Accumulation  and  Use  of  Capital." 

f  See  especially  "  The  Dartmouth  College  Case,"  vol.  viii.,  American 
Law  Eeview,  p.  189,  January,  1874,  and  Mr.  Shirley's  volume,  "The 
Dartmouth  College  Causes  and  the  Supreme  Court  of  the  United  States," 
St.  Louis,  1879. 

X  Planters'  Bank  vs.  Sharp,  6  How.  301 ;  Trustees  of  Vincennes  Univ. 
vs.  Indiana,  14  How.  268 ;  The  Binghamton  Bridge,  3  Wall.  73 ;  Davis  vs. 
Gray,  16  Wall.  203;  New  Jersey  vs.  Yard,  95  U.  S.  104;  New  Orleans 
Gas  and  Water  Cases,  115  U.  S.  650 ;  and  the  whole  series  of  taxation 
cases,  cited  supra. 


15 

failed  to  declare  its  adherence  to  the  principal  case  and  the 
improbability  of  its  reversal  in  the  most  explicit  terms,  thus, 
"  The  principles  they  maintain  are  now  axiomatic  in  American 
jurisprudence."*  Again,  "The  question  decided  in  that  [the 
Dartmouth  College]  case  has  since  been  considered  as  finally 
settled  in  the  jurisprudence  of  the  entire  country.  Murmurs 
of  doubt  and  dissatisfaction  are  occasionally  heard,  but  there 
has  been  no  re-argument  here  and  none  has  been  asked  for."t 
And  again,  it  is  said  that  the  courts  "  are  estopped  from  ques- 
tioning the  doctrine."!  Again,  "  The  doctrines  *  *  an- 
nounced by  this  court  more  than  sixty  years  ago  have  become 
so  imbedded  in  the  jurisprudence  of  the  United  States  as  to 
make  them  to  all  intents  and  purposes  a  part  of  the  constitution 
itself"§ 

The  legal  profession  Tvill  not  readily  unite  in  support  of  a 
demand,  however  urgently  it  may  be  pressed  by  popular  opin- 
ion, that  the  Supreme  Court  shall  reverse  the  original  decision. 
Every  sanction  which  establishes  the  maxim,  stare  decisis, 
forbids  this.  It  was  made  upon  the  greatest  deliberation. 
The  authority  of  the  greatest  names  in  our  judicial  annals 
supports  it.  Their  successors,  through  a  period  of  more  than 
sixty-five  years,  have  affirmed  and  followed  it.  Whether 
right  or  wrong,  it  is  now  too  late  to  overthrow  it.  Vested 
interests  and  rights,  the  investments  of  millions,  great  and 
beneficent  works  and  enterprises  depend  upon  its  permanence. 
The  language  of  Mr.  Justice  Davis  is  not  too  strong  when  he 
says  that  ||"the  security  of  property  rests  upon  it,  and  every 
successful  enterprise  is  undertaken  in  the  unshaken  belief  that 
it  will  never  be  forsaken.  A  departure  from  it  now  would 
involve  dangers  to  society  not  to  be  foreseen,  would  shock  the 
sense  of  justice  of  the  country,  and  weaken  if  not  destroy 

*  Von  Hoffman  vs.  Quincy,  4  Wall.  535. 
f  Farrington  vs.  Tennessee,  95  IT.  S.  685. 
X  The  Binghamton  Bridge,  3  Wall.  73. 
§  Stone  vs.  Mississippi,  101  U.  S.  816. 
II  The  Binghamton  Bridge,  3  Wall.  73. 


16 

that  respect  which  has  always  been  felt  for  the  judicial  de- 
partment of  the  government."  It  is  often  said  that  every 
persistent  popular  demand  finally  obtains  what  it  desires,  even 
from  the  judicial  tribunals.  But  there  is  little  ground  for  the 
expectation  that  this  case  will  be  reversed  under  any  conceiv- 
able pressure  of  public  sentiment.  It  will  continue  to  be  the 
subject  of  adverse  criticism,  which  will  be  intensified  and 
strengthened,  in  the  profession  and  outside  of  it,  unless  cor- 
porate abuses  are  restrained  or  come  to  an  end.  But  the 
remedies  for  these,  it  is  believed,  will  be  found  in  some  other 
way  than  in  the  reversal,  by  the  court  itself,  of  this  memorable 
judgment. 

(2)  Although  the  leading  case  has  thus  been  repeatedly 
affirmed  and  declared  to  be  unassailable,  we  find  it  qualified 
and  limited  by  important  adjudications  which  have  established 
principles  operating  in  a  high  degree  to  confine  and  lessen 
its  effect  in  encouraging  the  independence  and  aggressions  of 
corporations.  When  it  became  settled  that  grants  to  them 
were  not  to  be  extended  by  construction,  and  that  all  charters 
were  to  be  construed  strictly  against  the  grantees,*  whatever 
criticism  may  be  made  upon  the  doctrine  or  its  consistency 
with  the  Dartmouth  College  case,  it  is  certain  that  a  check 
was  thereby  laid  upon  the  effect  of  the  principal  decision. 
And  the  rule  established  in  the  Charles  River  Bridge  case  has 
been  repeatedly  affirmed  and  stands  as  firmly  as  the  rule  that 
a  charter  is  a  contract.  This  principle  has  been  steadily 
applied  where  corporations  have  invoked  the  protection  of  the 
constitutional  inhibition,  under  charters  which  contained  no 
clear  contract,  and  in  administering  the  rule  the  Supreme 
Court  has  denied  the  claims  of  many  corporations  to  the  ex- 
clusive privileges,  beneficial  exemptions  and  valuable  grants 


*  Charles  Eiver  Bridge  vs.  Warren  Bridge,  11  Pet.  420;  Richmond 
R.  R.  Co.  vs.  Louisa  R.  R.  Co.,  13  How.  71 ;  Perrine  vs.  Canal  Co.,  9  How. 
172;  Turnpike  Co.  vs.  State,  3  Wall.  210;  Ruggles  vs.  Illinois,  108  U.  S. 
526. 


17 

asserted  under  charters.  Under  this  principle  corporations 
have  been  apprised  that  the  securing  of  a  loosely-drawn  charter 
was  not  enough  to  confer  upon  them  all  the  rights  and  privi- 
leges expected,  that  charters  convey  nothing  by  implication,* 
and  that  they  are  always  subject  to  the  scrutiny  of  the  judicial 
power,  under  a  rule  of  strict  construction.  The  effect  of  such 
adjudications  upon  charter  legislation  has  undoubtedly  been 
beneficial.  It  has  made  legislatures  aware  that  if  it  was 
intended  to  confer  an  irrevocable  franchise,  privilege  or  ex- 
emption, that  purpose  must  be  clearly  expressed.  Many  a 
legislature,  brought  face  to  face  with  an  explicit  charter- 
contract,  would  hesitate  to  enact  it,  while  a  skillfully  drawn 
charter,  intended  by  its  promoters  to  contain  but  not  express 
a  contract,  might  pass  unchallenged.  Thus,  this  important 
rule  of  the  construction  of  charters,  in  its  actual  application, 
has  been  favorable  to  the  public  as  against  corporations. 

(3)  The  Supreme  Court  has  asserted  and  upheld  the  legis- 
lative authority  over  corporations  in  all  cases  where  their 
charters,    or   the   general   laws,    or   the   provisions   of  state 

*  Especially  in  the  taxation  cases  the  court  has  held  that  the  contract 
must  be  clearly  expressed  in  the  charter.  Providence  Bank  vs.  Billings,  4 
Pet.  514;  Salt  Co.  vs.  East  Saginaw,  13  Wall.  373;  The  Delaware  R.  R. 
Tax  Cases,  18  Wall.  225 ;  Tucker  vs.  Ferguson,  22  Wall.  527 ;  New  Jersey 
vs.  Yard,  95  U.  S.  104;  Hoge  vs.  R.  R.  Co.,  99  U.  S.  348 ;  Railway  Co.  vs. 
Philadelphia,  101  U.  S.  539;  Memphis  Gas  Light  Co.  vs.  Shelby  Tax 
District,  109  U,  S.  398  ;  Southwest.  R.  R.  Co.  vs.  Wright,  116  U.  S.  2311; 
Vicksburg,  etc.,  R.  R.  Co.  vs.  Dennis,  116  U.  S.  668  ;  Tennessee  s.  Whit- 
worth,  117  U.  S.  139-148.  And  the  privilege  of  exemption  from  taxation 
is  construed  to  be  the  special  privilege  of  the  corporation  to  which  it  is 
granted,  and  does  not  pass  to  its  successor  unless  the  law  granting  the  ex- 
emption expresses  a  clear  intent  to  that  effect.  Morgan  vs.  Louisiana,  93 
U.  S.  217 ;  Wilson  vs.  Gaines,  103  U.  S.  417  ;  Louisville  &  Nashville  R.  R. 
Co.  vs.  Palmes,  109  U.  S.  244 ;  Memphis  R.  R.  Co.  vs.  Commissioners,  112 
U.  S.  609.  And  exemptions  frofn  taxation  which  are  mere  bounties,  or 
privileges  granted  without  consideration,  may  be  withdrawn  or  repealed 
by  the  legislature.  Rector,  etc.,  rs  Philadelphia,  24  How.  301 ;  Tucker  vs. 
Ferguson,  22  Wall.  527;  West  Wisconsin  vs.  Board  of  Supervisors,  93 
U.  S.  595. 


18 

constitutions  reserved  to  the  legislature  the  power  of  amendment 
or  repeal.  This  means  of  retaining  the  control  of  corporate 
charters,  and  of  avoiding  "  the  unalterable  and  irrepealable 
character  of  the  contract,"  has  been  in  force  since  the  decision 
of  the  principal  case,  and  a  suggestion  by  Judge  Story  to  that 
effect  in  his  opinion  was  immediately  followed,  and  many  of 
the  states,  availing  themselves  of  this  mode  of  action,  have 
maintained  a  supervision  of  corporations  which  has  been 
effective /in  a  high  degree.  The  court  has  never  failed  to  give 
the  state  and  the  public  the  benefit  of  this  principle,  whenever 
the  charter,  or  general  law,  or  the  state  constitution  has 
reserved  the  power.  In  a  multitude  of  cases,  corporations 
have  been  denied  the  privileges  asserted  under  charters  claimed 
to  be  irrepealable,  and  have  been  subjected  to  the  efficient 
action  of  the  legislative  power.* 

As  the  power  to  amend  and  repeal  charters  would  be  ample 
in  the  state  legislatures,  in  the  absence  of  the  provision  of  the 
federal  constitution  forbidding  the  impairment  of  the  obligation 
of  contracts,  such  a  reservation  leaves  a  state  where  any 
sovereignty  would  be,  if  unrestrained  by  express  constitutional 
limitations.  Whenever  the  power  is  reserved,  it  may  be 
exercised  to  amend  the  charter  to  almost  any  extent  to  carry 
into  effect  the  original  purposes  of  the  corporate  organization 
and  secure  due  administration  of  its  affairs,  or  to  repeal  the 
charter  altogether,  so  as  to  terminate  absolutely  the  existence 
of  the  corporation  by  the  abrogation  of  "  the  organic  law  on 
which  the  corporate  existence  depends,  "f  ^^t  the  exercise  of 
the  power  of  amendment  or  repeal  cannot  deprive  corporations 
of  their   rights    or   property  acquired  by   the   use   of  their 

^Pennsylvania  College  Cases,  13  Wall.  213;  Miller  fs.  State,  15  Wall. 
478;  Tomlinson  vs,  Jessup,  15  Wall.  454;  Shields  vs.  Ohio,  95  U.  S.  319; 
Kail  way  Co.  vs.  Maine,  96  U.  S.  499;  Sinking  Fund  Cases,  99  U.  S.  700 . 
Railway  Co.  vs.  Georgia,  98  U.  S.  359;  Eailway  vs.  Philadelphia,  101 
U.  S.  539 ;  Greenwood  vs.  Freight  Co.,  105  U.  S.  13 ;  Spring  Valley  Water 
Works  vs.  Schottler,  110  U.  S.  348. 

t  Miller  vs.  State,  15  Wall.  478 ;  Shields  vs.  Ohio,  95  U.  S.  319 ;  Green- 
wood vs.  Freight  Co.,  105  U.  S.  19. 


19 

franchises.*  Thus  the  rights  of  shareholders  and  creditors  are 
protected.  So  that  the  reserved  power  of  amendment  or  repeal 
is  not  unlimited,  or  destructive,  or  violative  of  vested  rights. 

To  those  whose  indulgence  in  complaint  of  the  encroach- 
ments of  corporations  is  somewhat  sweeping,  it  may  be  fairly  sug- 
gested that  the  actual  and  practical  operation  of  this  reserved 
legislative  power  is  a  restraint  upon  corporations  much  more 
effectual  than  they  are  willing  to  acknowledge.  The  inquiry 
by  statistics  is  difficult,  but  we  venture  the  statement  that  the 
larger  number  of  corporations  existing  in  this  country  come 
under  legislative  control  by  \drtue  of  provisions  in  their 
charters,  or  in  the  general  laws  or  constitutions  of  the 
states.  In  the  majority  of  the  states,  constitutional  provisions 
forbid  the  granting  of  charters,  except  with  a  reservation  of 
the  power  of  amendment  or  repeal.  The  day  of  special  char- 
ters is  past.  General  laws,  for  the  most  part,  are  the  basis 
of  corporate  organization.  The  present  tendency  of  legisla- 
tion is  not,  to  say  the  least,  favorable  to  corporations.  And 
in  estmiating  the  necessity  for  more  severe  legislative  action 
concerning  them,  the  extent  of  the^present  control  of  them, 
under  the  reserved  power,  should  not  be  under-estimated. 
And  certainly,  any  criticism  upon  the  effect  of  the  Dart- 
mouth College  case,  as  encouraging  corporate  independence, 
should  not  leave  out  of  view  the  consistent  maintenance  of  this 
power  by  the  Supreme  Court. 

(4)  It  is  well  settled  that  the  legislature  may  exercise  the 
power  of  eminent  domain,  to  authorize  the  taking  of  the 
property  of  corporations,  including  their  franchises,  upon  due 
compensation,  t  This  principle  places  the  most  valuable  and 
exclusive  rights  and  franchises  of  corporations  under  legislative 
control,  whenever  the  public  interest  appears  to  the  legislature 

*  Miller  vs.  State,  15  Wall.  478  ;  Shields  vs.  Ohio,  95  U.  S.  319;  Green- 
wood vs.  Freight  Co.,  105  U.  S.  19. 

t  West  River  Bridge  Co.  vs.  Dix,  6  How.  507 ;  Eichmond,  etc.,  E.  E. 
Co.  vs.  Louisa  E.  E.  Co.,  13  How.  71 ;  Greenwood  vs.  Freight  Co.,  105  U. 
S.  22;  New  Orleans  Gas  Light  Co.  vs.  Louisiana,  etc.,  Co.,  115  U.  S.  650. 


20 

to  require  that  new  corporations  should  be  organized,  and  the 
constantly  developing  iJecessities  of  growing  and  progressive 
communities  aided  by  new  corporate  undertakings.  The  prac- 
tical operation  of  this  principle  is  to  keep  the  limits  of  the 
field  of  corporate  exertion  under  the  constant  supervision 
of  legislation,  and  to  leave  to  the  determination  of  the 
representatives  of  the  people  the  question  whether  that  field 
should  be  enlarged  or  restricted  at  any  particular  period. 
This  end  is  subserved,  and  corporations  which  have  acquired 
vested  rights  and  interests  receive  just  compensation  for  what- 
ever is  taken  from  them. 

(5)  The  most  important  adjudications  which  form  a  part  of 
the  System  of  doctrine  founded  on  the  Dartmouth  College  case, 
are  the  comparatively  recent  decisions  which  sustained  the 
exercise  of  the  supervisory  and  controlling  power  of  the  legis- 
lature in  the  "Warehouse  "  and  *'  Granger  "  cases,  so  denomi- 
nated. These  have  provoked  wide  discussion  and  earnest 
criticism.  They  have  been  assailed  by  many  in  the  profession ; 
they  were  accompanied  by  strong  dissent  on  the  part  of  the 
minority  of  the  court;  they  have  been  hailed  with  approval 
and  congratulation  in  large  sections  of  the  country  where 
public  sentiment  was  most  vigorous  in  antagonism  to  corpora- 
tions ;  they  have  been  regarded  by  many,  in  and  out  of  the 
profession,  as  inconsistent  in  reasoning  and  principle  with 
the  leading  case,  as  indicating  a  tendency  in  the  court  to  re- 
view and  reverse  it,  and  as  presaging  its  final  abandonment 
and  overthrow. 

These  cases  were  as  follows : 

In  Munn  vs.  Illinois,*  the  question  was  as  to  the  power  of 
the  legislature  of  Illinois  to  fix  by  law  the  maximum  of  charges 
for  the  storage  of  grain  in  warehouses,  at  Chicago  and  other 
places  in  the  state  having  not  less  than  one  hundred  thousand 
inhabitants,  and  to  require  persons  doing  business  as  private 

^94  U.S.  113. 


21 

warehousemen  to  take  out  a  license  for  such  business,  and  to 
declare  the  business  to  be  that  of  public  warehousemen.  The 
constitutionality  of  such  legislation  was  sustained,  and  it  was 
held  that  "  where  private  property  is  devoted  to  a  public  use 
it  is  subject  to  public  regulation ;"  that  "  property  does  become 
clothed  with  a  public  interest  when  used  in  a  manner  to  make 
it  of  public  consequence  and  affect  the  community  at  large. 
When,  therefore,  one  devotes  his  property  to  a  use  in  which 
the  public  has  an  interest,  he,  in  effect,  grants  to  the  public  an 
interest  in  that  use  and  must  submit  to  be  controlled  by  the 
public  for  the  common  good,  to  the  extent  of  the  interest  he 
has  thus  created.  He  may  withdraw  his  grant  by  discon- 
tinuing the  use,  but  so  long  as  he  maintains  the  use  he  must 
submit  to  the  control." 

The  "  Granger  Cases  "*  involved  a  consideration  of  the 
charters  of  different  railroad  companies  and  the  extent  of  the 
power  of  the  legislature  in  the  regulation  of  their  charges,  as  well 
in  the  absence  of  any  reservation  of  a  right  to  alter  or  repeal 
them,  as  where  such  reservation  was  embodied  in  the  charters 
or  in  the  constitutions  or  laws  under  which  they  were  granted. 

These  cases  decided  that  railroads  are  subject  to  the  super- 
vision and  control  of  the  legislature,  like  all  carriers  at  com- 
mon law,  being  engaged  in  a  public  employment  affecting  the 
public  interest,  and,  therefore,  under  the  decision  of  Munn  vs. 
Illinois,  subject  to  legislation  as  to  their  rates  of  fare  and 
freight,  unless  protected  by  their  charters  ;  that  in  the  absence 
of  charter-contracts  the  charges  by  railroad  companies  for 
services  within  the  state  may  be  limited  by  the  legislature 
and  a  maximum  of  charges  prescribed ;  that  where  the  state 
constitution  reserves  a  right  of  amendment  or  repeal,  the 
legislature  may  prescribe  a  maximum,  although  the  charter 

♦Chicago,  Burlington  &  Quincy  R.  R.  Co.  vs.  Iowa,  94  U.  S.  155;  Peik 
vs.  Chicago  &  Northwestern  Railway  Co.,  Ibid.  164 ;  Chicago,  Milwaukee, 
&  St.  Paul  R.  R.  Co.  vs.  Ackley,  Ibul.  179 ;  Winona  &  St.  Peter  R.  R. 
Co.  vs.  Blake,  Ibkl.  180 ;  Stone  vs.  Wisconsin,  Ibid.  181 ;  Ruggles  vs. 
Illinois.  108  U.  S.  526. 


> 


22 

authorizes  such  charges  as  are  reasonable ;  that  more  than  the 
maximum  fixed  by  the  legislature  cannot  be  recovered  by  the 
company  by  showing  that  the  amount  charged  was  no  more 
than  reasonable  for  the  services. 

Taken  together,  these  decisions  assert  the  complete  power 
of  legislative  regulation,  whenever  the  business  of  the  corpora- 
tion is  of  such  a  nature,  in  the  judgment  of  the  court,  as  to 
affect  the  public  interest. 

The  "Railroad  Commission  Cases,"*  decided  at  the  last 
term  of  the  court,  affirm  the  "  Granger  Cases "  and  go 
beyond  them,  sustaining  the  validity  of  a  statute  regulating 
rates  of  transportation  and  creating  a  state  board  of  commis- 
sioners to  supervise  and  enforce  the  same.  The  court  holds 
that  the  creation  of  such  a  board  does  not  violate  the  charter 
right  of  the  corporation  to  manage  its  affairs  through  its  own 
directors;  that  statutes  regulating  rates  of  charges  do  not 
deprive  corporations  of  their  property  without  due  process  of 
law ;  but  it  is  declared  that  the  power  of  regulation  is  not  a 
power  to  destroy,  that  limitation  is  not  equivalent  to  confisca- 
tion, and  that  under  pretence  of  regulating  charges,  the  state 
could  not  require  a  corporation  to  carry  without  reward  nor 
do  that  which  amounts  in  law  to  taking  private  property  for 
public  use  without  just  compensation  or  due  process  of  law. 
As  no  tariff  of  charges  had  been  fixed  by  the  commission  in 
question,  the  court  declines  to  say  what  action  of  the  commis- 
sion would  have  this  effect.  The  power  of  regulation  is 
declared  to  be  one  which  cannot  be  bargained  away  without 
express  grant.  Justices  Harlan  and  Field,  dissenting,  regard 
the  statute  in  question  as  one  impairing  the  charter- contract 
with  the  company  and  their  right  under  the  charter  to  fix 
their  own  charges  and  manage  their  own  affairs  through  their 
own  directors,  officers  and  agents,  though  they  concede  that 
statutes  may  be  valid  establishing  railroad  commissions  for 
many  purposes. 


/ 


*116U.  S.  307. 


23, 

These  decisions  assert  principles  which  have  not  received, 
and,  as  we  believe,  cannot  receive,  the  assent  of  the  most 
weighty  professional  opinion.  The  reasoning  of  the  dissent- 
ing opinions  seems  to  us  to  be  unanswerable.  These  express, 
with  cogent  logic,  abundant  authority  and  masterly  strength, 
the  consequences  of  a  doctrine  that  the  legislative  power  can 
be  unchecked,  in  its  interference  with  business  essentially 
private,  or  its  prescription  of  the  compensation  which  private 
and  corporate  owners  shall  receive  for  the  use  of  their  pro- 
perty. Without  such  decisions,  all  the  rights  of  regulation  of 
the  use  of  property,  and  to  prevent  its  abuse  to  the  injury  of 
the  public,  and  for  the  protection  of  the  public  interest,  can 
be  effectually  preserved,  in  all  cases  where  special  privileges 
are  granted,  under  settled  principles  as  to  the  exercise  of  the 
police  power.  To  state  the  reasons  of  our  conviction  would 
be  only  to  repeat  the  larger  portions  of  the  dissenting  opin- 
ions. The  decisions  seem  to  us  to  be  "subversive  of  the 
rights  of  private  property,  heretofore  believed  to  be  protected 
by  constitutional  guaranties  against  legislative  interference ;" 
they  hold  that  "  all  property  and  all  business  of  the  state  are 
held  at  the  mercy  of  the  legislature ;"  they  deprive  private 
and  corporate  owners  of  their  property  absolutely,  although 
under  the  guise  of  mere  regulations  as  to  its  use  and  employ- 
ment and  non-interference  with  its  title  and  possession.  It 
seems  indisputable  that  "  If  the  legislature  of  a  state  under 
pretence  of  providing  for  the  public  good,  or  for  any  other 
reason,  can  determine,  against  the  consent  of  the  owner,  the 
uses  to  which  private  property  shall  be  devoted,  or  the  prices 
which  the  owner  shall  receive  for  its  uses,  it  can  deprive  him 
of  the  property  as  completely  as  by  a  special  a<;t  for  its  con- 
fiscation or  destruction."  "  There  is,  indeed,  no  protection 
of  any  value,  under  the  constitutional  provision,  which  does 
not  extend  to  the  use  and  income  of  the  property,  as  well  as 
to  its  title  and  possession." 

It  is  difficult  to  resist  the  conviction  that  the  court,  in 
deciding  these   cases,   was   not   altogether   insensible   to   the 


24 

pressure  of  that  public  sentiment  which  prevailed  at  the  time 
— the  "  Granger  "  sentiment  of  the  Great  West. 

That  the  principles  of  these  decisions  are  inconsistent  with 
the  reasoning  of  the  Dartmouth  College  case,  is  maintained 
in  the  dissenting  opinions  and  insisted  upon  by  professional 
criticism.  The  question  "  to  what  purpose  can  the  constitu- 
tional prohibition  upon  the  states,  against  impairing  the  obli- 
gation of  contracts,  be  invoked,  if  the  state  can,  in  the  face  of 
a  charter  authorizing  a  company  to  charge  reasonable  rates, 
prescribe  what  rates  shall  be  deemed  reasonable  for  services 
rendered,"  can  receive,  it  seems  to  us,  but  one  answer,  viz., 
the  constitutional  inhibition  is  of  no  effect.  It  is  true  that 
the  court  expressly  declares  its  adherence  to  the  leading 
case ;  that  it  holds  that  the  railroad  charters  in  question  con- 
tained no  contracts ;  that  it  considers  that  the  College  case 
and  the  "  Granger  Cases,"  can  stand  together;  and  certainly, 
so  far  as  establishing  the  law  is  concerned,  the  court  is  the 
final  judge  of  its  own  consistency.  But  it  seems  to  us  that 
the  principle  of  these  cases,  that  the  use  of  property  affecting 
the  public  generally  clothes  it  with  a  public  interest,  conflicts 
with  the  decision  that  the  college  was  a  purely  private  cor- 
poration ;  that  the  decisions  tend  to  justify  unchecked  legisla- 
tive control  of  all  private  corporations ;  that  the  reasoning  of 
the  court  is  inconsistent  with  the  protection  of  the  contracts 
even  where  the  charters  expressly  contain  them,  and  tends  to 
allow  the  impairment  of  the  contracts  of  corporations  with 
third  persons,  especially  where  securities  have  been  issued 
•upon  corporate  property. 

The  legislative  regulation  of  corporations,  thus  maintained, 
is  based  upon  the  nature  of  the  business  carried  on.  The 
court  establishes  the  general  principle  that  whenever  such 
business  is  of  public  consequence,  and  affects  the  community 
generally,  the  legislative  power  is  complete  to  regulate.  If 
individuals  or  corporations  devote  their  property  to  uses  in 
which  the  public  has  an  interest,  there  is,  in  effect,  a  presumed 


25 

dedication  of  the  property  to  public  use,  and  an  implied 
submission,  on  the  part  of  the  owners,  to  legislative  control  or 
the  public  good.  The  limits  of  this  power  of  regulation,  there- 
fore, depend  upon  what  the  court  may  determine,  in  every 
case,  as  to  the  nature  of  the  business.  These  limits  are  unde- 
fined, and  although  the  court  plants  itself,  professedly,  upon 
the  principle  of  dedication  to  public  use,  and  an  implied  con- 
sent of  the  owners  of  the  property,  many  regard  the  virtual 
ground  of  decision  to  be  the  police  power,  which  is  generally 
exercised  in  invitum.  But  the  declared  opinions  of  the  court 
must  be  accepted  as  to  the  ground  of  their  decision.  The 
power  of  regulation  is,  therefore,  left  to  the  combined  deter- 
mination of  the  legislative  and  judicial  authority  as  to  the 
nature  of  the  business.  The  most  recent  decisions,  presently 
to  be  noticed,  show  that  the  court  asserts  its  power  to  deter- 
mine, in  every  case,  what  is  business  of  a  public  nature,  and 
what  is  ordinary  business,  and  when  and  to  what  extent  the 
police  power  may  be  exercised  in  respect  to  it.  But  may  it 
not  be  fairly  asked,  is  not  this  power  of  regulation  equivalent, 
as  thus  asserted,  to  the  power  of  the  legislature  over  public 
corporations,  and  are  not  corporations  virtually  held  to  be 
public  whenever  it  can  be  found  that  the  business  or  purposes 
of  the  corporate  organization  affect  the  community  generally  ? 
The  importance  of  the  results  of  these  decisions,  alike  to 
corporations  and  to  the  public,  has  been  demonstrated  in  the 
period  which  has  elapsed  since  they  were  announced.  Upon 
the  former  they  have  had  marked  effect  in  discouraging  cor- 
porate investments,  and  have  rendered  corporate  rights  and 
franchises  less  valuable.  Whether  the  public  has  derived  fi'om 
the  decisions  the  benefit  claimed  for  them  is  at  least  open  to 
question.  That  part  of  the  people  which  is  most  hostile  to 
corporations  finds,  in  these  decisions,  encouragement  for  the 
expectation  that  the  court  will,  at  no  distant  day,  reverse  the 
principal  case,  an  event  by  which  it  is  supposed  a  millenium  of 
relief  for  a  corporation-oppressed  people  will  at  last  arrive. 


26 

(6)  In  cases  subsequent  to  the  "  Granger  Cases,"  where  the 
constitutional  protection  of  contracts  was  invoked  in  behalf  of 
corporations  carrying  on  business  injurious  to  the  public  health 
or  morals,  the  court  has  declared  the  principles  governing  the 
exercise  of  the  police  power,  and  decided  that  charter-contracts 
do  not  preclude  the  legislature  from  enacting  such  laws  as  are 
necessary  for  the  protection  of  the  public ;  that  the  legislature 
"cannot  bargain  away  the  public  health  or  public  morals," 
and  that  authority  granted  by  statute  to  corporations  or  in- 
dividuals to  engage  in  particular  private  business  detrimental 
to  the  public,  does  not  constitute  a  contract  preventing  the 
withdrawal  of  such  authority.* 

(7)  So,  in  a  later  case,  the  principle  of  the  leading  case  has 
been  urged  to  protect  the  corporations  from  legislation  concern- 
ing their  business  intended  for  the  security  of  persons  dealing 
with  them,  such  as  statutes  regulating  the  business  of  life 
insurance  companies.  Such  legislation  was  held  not  to  be 
within  the  constitutional  inhibition.  It  was  decided  that  all 
grants  of  corporate  privileges  and  franchises  are  subject  to  the 
condition  that  they  shall  not  be  abused,  nor  employed  to  de- 
feat the  ends  for  which  they  were  conferred,  and  to  an  equally 
implied  condition  that  the  legislature  may  prescribe  such 
reasonable  regulations  as  will  secure  the  ends  for  which  the 
corporation  is  organized,  provided  such  regulations  do  not 
interfere  with  or  obstruct  the  enjoyment  of  the  corporate 
privileges.  This  principle  is  expressly  declared  to  be  essential 
to  the  protection  of  the  public  against  perils  arising  from  the 
ignorance,  misconduct  or  fraud  of  those  who  manage  corpora- 
tions, f 

(8)  The   decisions   in  the   New  Orleans  Gas   and   Water 

*  Beer  Co.  vs.  Massachusetts,  97  U.  S.  25  ;  Fertilizing  Co.  vs.  Hyde  Park, 
Ibid.  660;  Boyd  vs.  Alabama,  94  U,  S.  645;  Stone  vs.  Mississippi,  101 
U.  S.  814  ;  Butchers'  Union  Co.  vs.  Crescent  City  Co.,  Ill  U.  S.  746. 

t  Chicago  Life  Ins.  Co.  vs.  Needles,  113  U.  S.  574 ;  and  see  The  Sinking 
Fund  Cases,  ubi  supra. 


27 

cases,*  at  the  last  term  of  the  court,  maintain  anew  the  validity 
of  exclusive  charters  as  contracts,  and  declare  the  consistency 
of  all  previous  adjudications  with  the  complete  exercise  of  the 
police  power  by  the  state,  to  protect  the  public  health,  the 
public  morals  and  the  public  safety.  These  cases  involved  the 
validity  of  charters  granting  to  private  corporations  exclusive 
privileges  to  supply  the  city  of  New  Orleans  with  gas  and 
water  by  means  of  pipes,  mains  and  other  conduits  laid  in  the 
public  streets  of  the  city.  The  court  held  that  such  charters 
were  contracts,  which  could  not  be  impaired  by  subsequent 
constitutional  provisions  by  the  state ;  that  the  business  to  be 
carried  on  was  of  a  public  character;  that  the  power  of  a 
subsequent  legislature  to  recall  such  grants  could  be  limited  by 
the  charter-contracts,  and  exclusive  privileges  granted  in  such 
cases  stand  upon  the  same  principle  as  exclusive  grants  to  con- 
struct and  maintain  highways,  bridges  and  ferries,  and  exemp- 
tion from  taxation  by  charters ;  that  the  former  decisions  of 
the  court  (Beer  Co.  vs.  Massachusetts,  Fertilizing  Co.  V8. 
Hyde  Park  and  Stone  vs.  Mississippi)  sustaining  the  exercise 
\^  of  the  police  power,  rest  on  the  principle  that  one  legislature 
cannot  limit  the  power  of  its  successors  in  relation  to  private 
business  affecting  the  public  health  or  morals ;  that  authority 
given  by  the  legislature  to  corporations  or  individuals  to  en- 
gage in  such  particular  private  business  does  not  constitute  a 
contract  preventing  withdrawal  of  such  authority  or  the  grant- 
ing of  it  to  others ;  but  that  the  business  of  supplying  a 
city  with  gas  or  water  is  not  ordinary  business  in  which  every- 
j^^'one  may  engage,  but  is  of  a  public^ nature;  and  that  even  in 
such  case  a  grant  of  exclusive  privileges  does^  not  withdraw 
the  business  from  the  control  of  the  police  power,  when  the 
public  health,  morals  or  safety  require  its  exercise. 

These  decisions  affirm  again  the  adherence  of  the  court  to 
the  Dartmouth  College  case,  but  assert  for  the  court  the 
power  to  determine  in  every  case  whether  the  nature  of  the 

*115  U.S.  650-674. 


28 

business  is  private  or  public,  and,  consequently,  when  the 
police  power  may  be  applied.  These  cases,  by  those  who  hold 
that  the  decisions  of  the  court  cannot  be  reconciled,  will  be 
regarded  as  strengthening  their  view  of  the  court's  inconsistency, 
and  as  they  consider  the  "  Granger  Cases  "  to  be  a  radical 
departure  from  the  principal  case,'  they  will  only  find  in  these 
recent  decisions  a  new  and  variant  step,  not  in  the  path  of  con- 
sistent legal  principles.  They  will  not  hesitate,  therefore,  to 
insist  that  the  court,  in  every  future  case,  as  in  its  later  adju- 
dications, will  decide  as  their  views  of  public  policy  at  the  time 
may  require. 

But  if  we  can  conceive  the  court,  for  a  moment,  as  defending 
their  own  course  of  decision,  they  would  say,  "The  settled 
law  upholds  the  true  purpose  of  the  constitutional  inhibition, 
rightly  protects  the  just  rights  of  corporations,  secures  due 
administration  of  their  affairs,  and  consistently  maintains  the 
integrity  of  the  sovereign  powers  of  the  state,  the  police 
power,  the  power  of  eminent  domain,  the  reserved  power  of 
amendment  and  repeal,  and  thus  establishes  sufficient  and 
effectual  restraints  upon  corporations." 

IV.  This  survey  and  examination  of  the  principles  estab- 
lished as  law  by  the  leading  case  and  succeeding  decisions 
resting  upon  it,  considered  together,  has  been  undertaken  with 
a  purpose  to  exhibit  a  connected  view  of  the  system,  if  it  may 
properly  be  so  regarded.  By  such  a  view  we  may  better  esti- 
mate the  force  and  conclusiveness  of  the  criticism  which  has 
assailed  the  original  decision  and  its  consequences,  and  which 
will  continue,  probably,  to  arraign  the  court  before  the  bar  of 
public  opinion.  Public  opinion,  sooner  or  later,  insensibly 
moulds   the   law.*      Whatever   we    may  desire    as    lawyers, 

***  Public  opinion  may  and  does  review  the  constitutional  doctrines  an- 
nounced and  acted  upon  by  the  Supreme  Court  of  the  United  States,  and 
sometimes  this  review  has  been  followed  by  very  practical  consequences," 
Geo.  Ticknor  Curtis,  in  his  discussion  of  "  The  Doctrine  of  Presumed 
Dedication  of  Private  Property  to  Public  Use"  (John  Wiley  &  Sons, 
N.  Y.,  1881),  citing  "  The  Dred  Scott  Case." 


29 

however  much  we  may  wish  that  the  judicial  tribunals  shall  be 
above  the  reach  of  popular  opinion,  nevertheless  they  are  in- 
fluenced by  it.     The  law  is  the  outgrowth  of  the  necessities  of 
the  community.     It  is  idle  for  the  profession  to  ignore  the 
serious  charge  that  by  reason  of  the  decision  in  the  Dartmouth 
College  case,  corporations  possess  almost   sovereign  powers, 
and  that  the  doctrine  of  an  inviolable  charter-contTact  has 
suspended,  in  their  favor,  the  exercise  of  the  sovereign  powers 
of  the  state.      This  charge  must  be  met   according   to  its 
gravity ;  it  must  be  considered  whether  the  need  of  restraint 
upon  corporations  is  increasing  or  diminishing,  and  where  the 
remedies  for  corporate  abuses  and  aggression  are  to  be  found, 
if  required.     But  this  inquiry  will  not  be  prosecuted,  either 
in  the  legal  profession  or  in  the  judicial  tribunals,  in  any 
spirit  of  undiscriminating  enmity  to  corporations.     The  incal- 
culable benefits  they  have  conferred  upon  the   country,  the 
great  work  they  have  performed  in  its  progress  and  devel- 
opment, are  manifest.     The  legal  profession  can  do  much  to 
influence  and  guide  public  opinion ;  to  show  that  the  demand 
for  the  reversal  of  the  Dartmouth  College  case  is  impractica- 
ble ;  to  maintain  the  integrity  and  permanence  of  principles 
which  are,  to  say  the  least,  settled  law ;  to  inculcate  that 
respect  for  the  highest  judicial  tribunal   of  the  country  to 
which  it  is  entitled  by  its  position,  its  history  and  the  purity, 
abilities  and  learning  of  the  judges.     This  may  be  done,  and 
ample  room  will  be  left  for  free  and  enlightened  criticism  of 
its  decisions.     It  is  a  reasonable  expectation  that  the  law  will 
be  finally  settled  in  such  a  way  as  to  reconcile  complete  pro- 
tection of  corporate  rights  and  vested  interests  with  the  unim- 
paired exercise  of  the  sovereign  powers   of  the  state.     The 
majority  of  the  court  regard  that  as  even  now  accomplished, 
but  as  to  this  there  is  a  wide  difference  of  opinion.     One  of 
the  judges  who  has  most  strenuously  resisted  the  doctrine  that 
the  taxing  power  can  be  restricted  by  charter-contract,  pre- 
dicts that  it  must  be  finally  abandoned.*     Whether  this  can 
*  Miller,  J.  in  Washington  University  vs.  Rouse,  8  Wall.  444. 


30 

be  done  without  overthrowing  the  whole  system  of  decisions  is 
doubtful;  because,  as  we  have  seen,  the  taxation  cases  are 
those  wherein  the  principle  that  a  charter  is  a  contract  has 
been  most  frequently  and  explicitly  affirmed.  If  the  prin- 
cipal case  is  not  reversed,  still  less  is  it  probable  that  the 
remedy  suggested  by  the  most  earnest  of  its  opponents,  an 
amendment  of  the  Federal  Constitution,  will  be  attained.  It 
would  be  resisted  by  all  the  power  of  corporations,  and  such  a 
measure  could  not  be  enacted  unless  by  practical  unanimity 
of  all  public  interests  and  general  concurrence  of  professional 
and  public  sentiment.  If  the  aims,  the  ambitions,  the  inde- 
pendence of  corporations  should  continue  to  be  aggressive,  and 
become  dangerous  to  the  public  welfare,  remedies  must  and 
will  be  found.  What  these  shall  be  is  not  within  the  scope 
of  the  present  discussion. 

As  lawyers  and  as  citizens  we  may  indulge  the  hope  that 
these  questions  will  be  determined  and  these  contentions  com- 
posed, with  complete  conservation  of  the  judicial  and  legisla- 
tive powers  of  government,  and  with  just  regard  for  the 
interests  of  corporations,  the  protection  of  the  public,  and  the 
welfare  and  progress  of  the  nation. 


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